The $5 Limit on Overdraft Fees May Soon Be Struck Down

A $5 cap on fees for overdrawing your bank account balance is likely to be among the latest consumer protections from Joseph R.Biden Jr.’s presidency to fall.Congress voted last week to strike down the $5 cap on most overdraft fees approved by the Consumer Financial Protection Bureau late last year.

President Trump is expected to sign the change into law, though the timing is uncertain.The change means that the biggest banks and credit unions will be able to continue charging hefty fees — often ranging from $15 to as much as $35 — for covering shortfalls when you write a check or use your A.T.M.

card for more money than is in your checking account.Households that pay overdraft fees would have saved an average of $225 a year under the proposed rule, the consumer bureau said when it enacted the rule.Households that struggle to pay bills, save for emergencies and manage debt are more likely to pay overdraft fees, the Financial Health Network, a nonprofit focused on financial stability, has found.

Such households are disproportionately Black and Latino, and most make $30,000 a year or less.For this group, which may lack options for affordable credit, overdraft fees compound financial challenges and “can have a considerable negative impact,” the network reported in 2023.“People with low incomes really bear the brunt of this,” said Nadine Chabrier, senior policy and litigation counsel at the Center for Responsible Lending.Consumers also won’t see lower fees when they pay their credit card bills late.

This week, the Trump administration scrapped an $8 limit on most card late fees, which hover around $32.We are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access.If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber? Log in.Want all of...